Forecasting with VEC Models

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Forecasting with VEC Models

Postby whoami » Wed Nov 11, 2009 12:29 pm

I am new to using MODEL solving. So, any help would be greatly appreciated.

1. First, I fit a VEC model with three variables X, Y and Z (with two cointegrating equations)
- Sample size: 2006m01 to 2009m09

2. Then I use, PROC-MAKE MODEL to define and solve a model

3a. I want forecast from 2009m10 till 2015m12. I am interested in the forecast values of X and Y after fixing the variable Z at $100 (for example)
3b. I do this by entering the value 100 in Z data-points from 2009m10 till 2015m12 - IS THAT THE RIGHT WAY?

4. Then I solve it - I want multi-step forecasting; so, I guess I have to choose DYNAMIC. Should I use DETERMINISTIC/STOCHASTIC forecast?

5. If I change Z = 100, 200, 300, I obtain different forecast values for X which can be denoted as X_100, X_200, X_300
But, the forecast values for Z_100 are very different from the value Z = 100, that I entered for Z from 2009m09 till 2015m12 - Is it because the VEC model fits poorly? I am stuck.

Any tips would be helpful.

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